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Was the transfer of a public health team commissioning health services a TUPE transfer?

Valuable guidance was given by the EAT in Nicholls & Ors v LB Croydon.

Croydon Primary Care Trust transferred its public health team (which was concerned mainly with the commissioning of public health services) to the London Borough of Croydon. In connection with the transfer, the Secretary of State made The Health and Social Care Act 2012 (Croydon Primary Care Trust) Staff Transfer Scheme 2013.

Certain aspects of the TUPE Regulations (for example, Reg 4(4) (variation of employment terms void if the sole or principal reason for it was the transfer)) were not replicated in the Scheme. And the right to claim automatic unfair dismissal (TUPE reg 7(1)) under the Scheme was time-barred thus the employees sought to rely on the provisions of TUPE themselves. But was there the requisite transfer of an economic entity, or, instead, a transfer of administrative functions between public administrative authorities, which was excluded by reg 3(5) of TUPE? The judgment of the EAT contains a long and valuable discussion of cases and criteria in the field of transfer of undertakings and competition law on the meaning of "undertaking", "economic activity" and the "exercise of public powers".

The employment tribunal at first instance had concluded that the public health team's activities involved the exercise of public authority and so were caught by reg 3(5). The EAT agreed that the public health team's activity in purchasing or commissioning health services was not an economic activity. But the employment tribunal also found that all, or almost all, of the work done by the public health team could be, and was, offered by "non-state actors operating in the same market". That would normally be a strong indication that the public health team was carrying on an "economic" activity. The tribunal should have explained its reasons for not drawing from that finding the conclusion that the team was carrying on an economic activity. Therefore the case had to be remitted to another tribunal for reconsideration.

But if there had been a relevant transfer, reg 4(4)/7(1) would only apply once the contract of employment had been transferred under reg 4(1) of TUPE. Reg 4(1) states that the contract transferred is one "which would otherwise be terminated by the transfer".

Croydon contended that in the event that there was a relevant transfer it could not have operated so as to terminate the contracts of employment of any of the employees concerned because their employment had been preserved by the "safety net" provisions of the Staff Transfer Scheme.

This argument was rejected by the EAT. Article 3(1) of the Acquired Rights Directive does not contain any limitation on its application equivalent to the words "which would otherwise be terminated by the transfer". Those words could not therefore prevent a transfer of the employment contract under TUPE if there had been a transfer of an undertaking.

Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary.